A Concise History Of Selling Out
This is a short history of what the Vandals did to us and our industry. I lived through it. At the time, I had no clue what was happening. Now, I can see that it is our fault. Pharmacists were chasing nice pay days and they let control get into the hands of idiots.
There is a good rule:
History can definitely repeat itself if everyone concentrates very hard on making the same stupid mistakes.
Back in the day (1965), pharmacy was a 40% Gross Profit business. We bought it for 60 cents and sold it for a dollar. 60 dollars, we sold it for a hundred dollars. Everybody did that. Then, in the Michigan/Ohio area, a Detroit company called REPUBLIC VITAMIN COMPANY opened up pharmacies in their stores. After awhile, they started discounting prescriptions, then every thing else. REVCO opened up stores all over the place in Ohio (That’s where I was at the time) Far from glamorous, they used unfinished pine boards for shelving. Cheap, cheap, cheap. Price was everything. Remember, there were no Third Parties then. There were no credit cards in Ohio. The BankAmericaCard came out a few years later in California. People paid cash or check. Credit was carried by the pharmacy. You need a 40% Gross Profit business if you are going to offer credit.
I was in the San Francisco Bay Area in the late 1960s. I worked for Thrifty Drug Stores and they were anything BUT the Cut Rate they advertised. Thrifty ran 40% Gross Profit pharmacies.
Then, some bright boy ran into the executive suite at one of the other chains (I can’t remember which one was first) and said gleefully, “Hey, we don’t have to make 40%. Let’s cut the top 50 drugs to 30%. We will have a competitive advantage. We will take all of the business.”
I do not believe that it was pharmacists who made these choices. Certainly not pharmacists with their feet on the floor. I believe that it was non-pharmacists, probably bean-counters, MBAs Masters of the Universe who set our industry to discounting prescriptions. A very curious dynamic. CEOs and executives who may have been pharmacists gave control of our industry to idiots with no standing. Bad choices. Very bad.
The story of our industry and profit is much more pathetic. Remember, we did this willingly. For a no-hassle paycheck. We allowed non-pharmacists to market the pharmacy no differently than they marketed the camera department. Our own fault.
Then, enter the PBMs. PCS was the first to offer on-line adjucication. Then all of them in a short time. Until then, PAID and PCS were the players. We mailed in paper claims. They paid FULL AWP plus $3.60. Good profit. They don’t pay that in 2012.
Union members, teachers, nurses and others who had prescription beneifits paid out front, we filled out their forms and they were reimbursed directly.
About 20 years, the PBMs insinuated themselves into our industry and they kept on burrowing until now it is, truly, THE TAIL THAT WAGS THE DOG.
The PBMs are for-profit engines. They provide NO health care. Express Scripts is no different than a big bank. They just move money and keep a big pile for themselves. That is a helluva lot of money that used to go for prescriptions/health care.
So, where are we? In deep shit is where we are. Clinically trained medical professionals who are pimps for the PBMs and Big Pharma.
The PBMs are not stupid. They wanted to know our “Usual and Customary” charge. Could it possibly be as good as 18%? I do not have a clue.
They will pay a discounted value based on our U & C. What if our U & C was 40%? Perhaps thousands of independents would still be in business. The chains would not be runnin lemming-like for the cliff. The MBAs elieve the old cut costs and look for growth. We don’t need them. There WILL be growth.
Trust me, it was not a feet on the floor pharmacist who rushed into the executive suite a few years ago and gushed, “Hey, I got it. Let’s sell prescriptions for $4.00.” This Master of the Universe was thinking, “Oh, what a good boy am I”.
Then an MBA at Publix and Meier Grocery stores one uped the industry. They started giving away free antibiotic prescriptions.
Then, a Giant Eagle (Pittsburgh) grocery MBA said, “We can do better than that. Let’s give away glyburide and metformin prescriptions for free.”
Giant Eagle, by the way, has a full-bore compounding pharmacy.
You cannot tell me that feet on the floor pbarmacists had anything to do with this crap. There were many “Yes Men”, but it had to make them puke in private.
The question is: What are we going to do? I believe I know, but I’m not giving anything away. Out-of-the-box thinking is what it will take and that does not come free.
Professionally, we are on the edge of failure and it will not be pretty if it gets taken away from us.
Pharmacy, the business, is close to failure also. You gotta make frikkin’ money. Even a surgeon knows that. If our industry fails as a business, you have not seen ugly yet. Think dispensaries. Not pharmacies. If the dispensing of Rxs is turned over to dispensaries, what is going to happen with you?
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This article is thought provoking, informative and MUCH appreciated for this thirty-something Pharmacist…………
@JP.. I think that given the current trend in reimbursements.. I think that we will see a hybrid of dispensaries & pharmacies… just look at what the chains are doing.. they have been turning their stores into convenient stores.. that may or may not need the Rx dept to financially survive.
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Imagine if you will.. that the chains decide – or forced to decide because of reimbursements .. to have a 24 hr store as a hub for the rest of the stores in a 5-20 mile radius.. the current stores will operate as “one-man store” 10:00 – 18:00 +/- M-F… the 24 hr store will operate much like a central fill or mail order operation – highly automated. Pts can elect to pick up their Rxs at the local short -hr -Rx dept or if they have Rxs after their hrs.. they will have to travel to the 24 hr hub… or wait until the short-hrs store to reopen.
With all the majors on central databases.. it will not really make much difference if a prescriber sends a e-Rx to any one store.. it can be pulled off the server… where ever the pt ends up showing up.
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IMO – this would reduce the number of RPH slots – at the retail/community level by at least 25%..
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One major hurdle for us is being granted provider status.. being able to bill for our services .. independent of the permit holder… but then.. the entity that could be forced to pay for our services – the insurance industry – would probably fight that change “tooth & nail”… for they would have to share their revenue with something that is more of an intangible – advice – and besides.. they have been able to make it a legal requirement via OBRA 99 and contractually via their PBM contracts.. that we must provide consulting – at no charge…
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throw into this mix.. the basic inertia of those in our profession.. to wait for “George to do it” .. the downhill slide will most like continue
Great storytelling JP. I myself am trying to live as cavalier a life as you: free-spirited and of whimsy. My Biostats teacher from college said I should go work in Holland: they fill prescriptions in the morning as a closed door pharmacy until 2pm when patients are allowed in to pick up their orders. Perfect work design for pharmacy! Just gotta have an adventure with this thing even if I get “reprimanded” every day for not kowtowing to an equally abused/unequally paid store manager with a salted chip in his soldier that is wearing him down everyday. Anyway, we are headed down the toilet: maybe the profession will be around long enough for me to earn enough money to pay my loans?!
Ah yes, $3.60 + AWP. The salad days of the late 1970s. I remember practicing back then before going to graduate school. As a pharmacy intern I recall working in a place that used 40% markup except on antibiotics — then it was 100%!